Chinese use tech to skirt royalties

China developing domestic compression standard

SHANGHAI — After close to three years of being pressed by foreign licensing agencies for payments due on compression standards like MPEG-4, Chinese authorities have announced that they are on the verge of launching their own video compression spec.

Disputes came to a head last year when DVD player manufacturers including Hitachi, Panasonic, Mitsubishi, Time Warner and JVC threatened to take domestic manufacturers to court if royalties close to $20 per machine sold were not paid.

The deadline came and went and manufacturers represented by the Chinese Acoustic Equipment Assn. continued to kick out close to 10 million players a year (over a fifth of the world’s output) without paying up, insisting they would pay around $4 and no more.

Today, DVD players sold domestically continue to retail for much less than overseas brands, and prices are dropping further, with some players now available for less than $50.

After five years of efforts by the Chinese Academy of Sciences to establish a homegrown compression technology, the Audio Visual Coding Standard (AVS) Workgroup of China was set up to commercialize the research at the height of last year’s disputes.

Comprised of dozens of local university research departments and government organizations, as well as domestic and international DVD manufacturers, AVS has announced that its new compression spec will be unveiled at the end of this year, followed in 2004 by a basic decoder.

This is not the first time that China has pushed for its own technology, skirting royalty payments due to foreign patent holders. In the mid-’90s, at the height of the Asia-based video CD (VCD) boom, China launched the S-VCD. But authorities found it hard to get studios to release their films in the format.

The same issues will face AVS.

“Any new technology would need to be backward compatible with DVD and CD technology,” commented one industry insider who works for a foreign DVD manufacturer in China, “rather than taking on those entrenched formats.”

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